New Jersey hedge fund shop Stone Toro Asset Management is preparing for its second fund launch of the year.

The Princeton firm, which last month unveiled an event-driven arbitrage vehicle, is putting the finishing touches on a planned long/short technology fund. The new product, Stone Toro Alpha Tech, is set to debut in the summer.

Stone Toro, which was founded last year, has been using the new fund's strategy in eight separately-managed accounts since October, HFMWeek reports. The relative value fund will focus on small- and mid-cap U.S. technology stocks, with 50 long positions and half as many short.

The strategy has proven successful in its short life, rising 1.09% in November, 6.14% in December and 0.83% in January.

"Small- and mid-cap technology has historically led the market out of its recessionary phases," fund manager Michael Jarzyna told HFM. "You are seeing strength in technology and strength in small- and mid-cap stocks."

The new fund has a capacity of $500 million and a $1 million minimum investment requirement, with no lockup and monthly liquidity. It will charge 2% for management and 20% for performance, with Deutsche Bank as its prime broker.

Current investors in the managed account using the strategy will be able to keep their money segregated or join the hedge fund when it launches.

From the current issue of

The ratio calendar combination spread couples two ratio calendar spreads, one using calls and the other using puts. The call strike prices are higher than the put strike prices. This strategy is complex and profit is limited, but if a high amount of time value is involved in the short positions, that profit can be substantial and risk is still limited.